Hot real estate market mostly missed Illinois, ranking 48th for new homes

Hot real estate market mostly missed Illinois, ranking 48th for new homes

Illinois saw new residential building permits in 2021 issued at one of the slowest rates in the nation. The rest of the U.S. saw real estate booming.

Real estate markets in the U.S. caught fire in 2021 as low mortgage rates, pent-up demand and low inventories sent sales prices soaring during the year. But Illinois was just lukewarm.

Residential construction permits per capita grew by 17.5% nationally in 2021, according to data released Feb. 17 by the U.S. Census Bureau. Illinois was far slower, coming in at 10.6%.

The state’s slow growth in residential construction permits meant Illinois remained one of the states with the least home construction activity in the nation.

Illinois issued 1.6 residential construction permits per 1,000 residents in 2021, the third-slowest rate in the nation. Only Rhode Island and Connecticut issued new permits at slower rates.

While Illinois did experience growth in total residential permits during 2021, it was far lower than the national average. Illinois was one of only eight states where the number of permits has declined since 2019. Total residential permits issued are down 3.6% relative to pre-pandemic levels, even after adjusting for the state’s declining population.

The data includes both single-family and multifamily construction permits. Illinois performed equally as poorly when it came to single-family construction permits, ranking 48th in the nation, while faring only slightly better when it came to multifamily construction permits, ranking 41st in the nation. Multifamily construction permits are down nearly 29% since 2019, the fourth-largest decline in the nation.

Illinois’ lagging residential construction figures come as no surprise. Even a national housing boom hasn’t been able to increase demand enough to offset Illinois’ declining population. 2021 marked the eighth consecutive year of population decline in Illinois, as people moving away and total population loss reached record levels.

The major reasons Illinoisans are choosing to leave the state are for better housing and employment opportunities, both of which have been made worse by poor public policy decisions.  Illinois’ second-highest property taxes in the nation are now equivalent to nearly seven additional mortgage payments annually for new homeowners. Nearly half of Illinoisans have thought about moving away, and they said taxes was their No. 1 reason.

High taxes aren’t going to improved services or quality of life for homeowners. In the past two decades, less than 50 cents of every additional dollar paid in property taxes went to pay for services. Statewide, only 20% of the increases in property taxes collected for municipal police and fire departments went toward protective services.

The bulk of new tax collections went to pensions.

Growth in pension costs statewide has exceeded Illinoisans’ ability to pay. When rising property tax dollars do not go to valuable current services, Illinois housing becomes less desirable and the Illinois exodus worsens.

As more and more Illinoisans leave the state, there is even less incentive for builders to construct new homes and fewer homeowners to carry the state’s high-tax burden. Without structural reform to Illinois’ pension system and spending priorities, expect these trends to continue.

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